How to mine Litecoin
It’s generally considered too late to get into Bitcoin mining – the ultra-competitive process now requires more computing power and electricity than the typical individual can muster. Mining Litecoin, or another altcoin, is more realistic for someone who wants to get started in mining as a hobby.
Before starting, any prospective miner should consider how much they really want to do this and why. Much like the 19th Century Gold Rush in America, lots of people have dived-in to the cryptocurrency world and, like many of those 19th Century Americans, they will have wasted their time and money.
If you start mining Litecoin today, then your electricity costs – not to mention the setup costs involved in buying a mining computer – are likely to outweigh any profits. The same is true for a lot of altcoins too. Use a mining calculator at a site like CoinWarz to check profitability before you start.
Drilling down into mining
So, you definitely want to get started in mining but what exactly does that mean? Here’s the basic explanation: mining is the process by which cryptocurrency transactions are verified, so that people are not able to cheat the system, for example by spending the same coins more than once.
Miners do this by gathering together transactions into a block, which they want to append to the ongoing chain of transactions – hence the name “blockchain”. Having verified the transactions, the mining computers then compete to be the first to find a cryptographic ‘hash’ – which is a 64-digit hexadecimal number.
Calculating a hash isn’t difficult, but what makes the process complex is finding a hash that is less than or equal to a hash specified by the network. This is essentially a guessing game with a mind-boggling number of possible answers, so computers generate hashes over and over again, as fast as possible, in the race to be first to find one that fits. This is a lot of work for the mining computers – and uses a lot of power – but the idea is that this process, which is known as “proof of work” is too much for bad actors to be able to replicate.
Changing anything anywhere in the chain of transactions, for example to try to spend coins a second time, will invalidate subsequent hashes and therefore alert the network that something has been tampered with.
In the early days of cryptocurrency, it was possible to mine coins with spare CPU (central processing unit) capacity. Then mining became the preserve of GPUs (graphical processing units – essentially, the graphics cards created to power demanding video games) before, in the case of Bitcoin, moving to dedicated mining machines known as ASICs (application-specific integrated circuits). These days, you can’t mine with spare capacity on your machine – you’ll need a computer dedicated to mining – but it is still possible to mine altcoins with GPUs.
The right hardware
Choosing a mining computer is a matter of buying a desktop machine – laptops usually lack power and their size means they will almost certainly overheat – and loading it with as many GPUs as you can afford. Six is typically a good number, but it isn’t cheap.
Even then, mining alone is not likely to bring you much success. It’s better to join a mining pool, sharing your resources – and splitting the income – with a group of other miners. This is similar to joining a lottery syndicate. Of course, you’ll win playing by yourself but you’re also less likely to win. Being part of a syndicate means splitting your winnings but buying more tickets and therefore increasing your chances. The same is true with mining – you’ll get a more regular income, but it will be shared.
This is especially true because mining gets harder as a cryptocurrency matures. A cryptocurrency is designed to produce a fixed number of coins; once all of these have been mined then no new ones will be created. Increasing mining difficulty as more coins are mined is an intentional move, designed to ensure that all of the available coins are not mined too quickly.
What this means in practice is that miners need to produce even more guesses at the correct hash in order to have a chance to find a correct one. That gives an advantage to big, professional miners and large pools, and further tilts the playing field against small-timers.
One thing to keep in mind with your hardware is that mining can wear it out quickly. That’s because mining is a demanding process that keeps the computer CPU or GPU working at full capacity. Doing this 24/7 produces a lot of heat, so components wear out more quickly.
Think of it like a car that is designed to last for 10 years at 10,000 miles per year. If you drive 50,000 miles per year, then your car will have exceeded its useful life after two years. Mining has a similar effect on computer components – it forces them to run at maximum capacity, round the clock, and therefore they reach they end of their useful life more quickly. Consider turning the machine off regularly to let things cool down.
Finally, don’t use the machine for anything else if you want to get the most efficient performance. Anything else you do with the computer, whether it’s browsing the web or checking email, will take processing capacity away from mining.
Pools and software
You’ll need a wallet for every currency that you plan to mine. A wallet is a place where your coins will be stored – or at least where you’ll store the data on how many coins you have, and the private key you use to prove ownership. There are several different types of wallet, including ones kept on a computer or smartphone and ones that are on a dedicated device, similar to a USB stick.
If you are planning to mine for some time then you should consider operating more than one wallet – an online one into which newly-mined coins will be deposited, and one that is mostly kept offline, into which you regularly move your coins for safekeeping.
Your wallet will take time to sync with the network. Meanwhile, you can find and download a mining program. A popular one is cgminer but the one that you choose will depend on your computer, what coin you intend to mine and what kind of software you are comfortable with. For example, a few mining programs have GUIs (graphical user interfaces), which make them easier to use, but some require you to start them from your computer’s command line.
Exactly how to set up the program should be detailed in its documentation. If not, most popular mining programs will have resources online that you can use to set them up. Before you do, make sure you look into the background of the software to be sure that it is secure. Some less reputable programs will turn your machine into a mining computer that generates coins for the programmer.
Next, you need to find a pool to join. As mentioned above, you can mine solo but it really is much harder. Finding a pool is the most efficient route to success. As with mining programs, check out the history of the pool you are interested in, the team behind it and look at any reviews that have been posted. Some pools can be badly run, some of them are scams and, occasionally, they fall victim to hackers.
One added precaution that you can take is to move your coins out of the pool regularly and put them into another wallet. If the worst does happen and the pool is hacked, then your losses will be minimised.
Once you have registered with the pool, you will need to create a ‘worker’. This is an account for your mining computer. If you have more than one mining machine then you will need to create more than one worker. Some pools will set this up for you automatically, but you should check otherwise you won’t be earning anything.
Then all you need to do is start your mining program and let the computer get to work. Don’t expect instant results – there is an element of randomness in all mining. Even a large pool will have periods where it doesn’t confirm any blocks, so be patient.
Monitor your hardware regularly to ensure that it is performing properly and that nothing has failed. Keep warranties, guarantees and any insurance handy, just in case a component fails early. Finally, keep track of your power bills and compare them to profits. At some point you might decide that your hobby is getting expensive.